Shares of Paramount Global climbed 12% in after-hours trading on Thursday after the media conglomerate reported net income of $295 million, or 43 cents per share, for its third quarter of 2023. On an adjusted basis, the company reported earnings of 30 cents per share. Revenue grew 3% year over year to $7.13 billion.
Analysts surveyed by Zacks Investment Research were expecting earnings of 9 cents per share on revenue of $7.17 billion.
Paramount+ added 2.7 million subscribers during the quarter for a total of more than 63 million.
Paramount’s direct-to-consumer division, which includes Paramount+ and Pluto, a free, ad-supported streaming service, saw revenue grow 38% year over year to $1.69 billion. The division’s loss narrowed 31% year over year to $238 million from $343 million a year ago. Advertising revenue for the DTC segment grew 18% year over year to $430 million, reflecting growth from Paramount+ and Pluto TV; subscription revenue grew 46% year over year to $1.25 billion, driven by subscriber growth and pricing increases for Paramount+ and revenue from pay-per-view events; and licensing revenue was flat year over year at $4 million. Paramount+ saw revenue grow 61%, driven by subscriber growth and increased advertising revenue.
Revenue from the company’s TV Media segment fell 8% year over year to $4.57 billion. Advertising revenue fell 14% to $1.7 billion, reflecting continued softness in the global advertising market and lower political advertising. Affiliate revenue was flat year over year to $2 billion, while licensing and other revenue fell 12% year over year to $860 million, driven by lower revenue from original content produced for third parties. Content available for licensing was impacted by temporary production shutdowns as a result of the Writers Guild of America and SAG-AFTRA strikes.
Filmed Entertainment revenue grew 14% year over year to $891 million, with theatrical revenue growing 63% year over year to $377 million, primarily driven by the releases of “Mission: Impossible – Dead Reckoning Part One” and “Teenage Mutant Ninja Turtles: Mutant Mayhem.” Licensing and other revenue decreased 7% year over year, reflecting the prior year success of “Top Gun: Maverick” in the digital home entertainment market and lower revenue from studio rentals and production services as a result of labor strikes. Advertising revenue grew 67% year over year to $5 million.
The latest quarterly results come after the WGA ratified its new contract agreement with the Alliance of Motion Picture and Television Producers and ended a 148-day strike last month. Meanwhile, the AMPTP has returned to the negotiating table with SAG-AFTRA, which has been on strike since July 14.
“We’re happy that WGA deal was reached and ratified. It’s a deal that’s good for our company and our industry,” Paramount Global CEO Bob Bakish told analysts. “At the same time you saw that we recently made some changes to our film slate, which has been impacted by the continued SAG-AFTRA after strike. And while late night is back up and running, the scripted side of TV is still strike impacted. Obviously we all hope to be back at work soon.”
Elsewhere, Paramount has closed the $1.62 billion sale of Simon & Schuster to the investment firm KKR. The company expects the transaction to yield approximately $1.3 billion in net proceeds, which it plans to use to pay down debt.
Looking ahead, Paramount anticipates that its full-year DTC losses in 2023 will be lower than in 2022, with the division’s losses in the fourth quarter of 2023, similar to the fourth quarter of 2022. The DTC business remains on track to reach profitability in 2024.
It also anticipates strong free cash flow in the fourth quarter as the strike continues to limit the production of content. The company generated $377 million in free cash flow during the third quarter.
More to come…
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